SFD Circular No. 07: Green Transformation Fund (GTF) in Taka for Export and Manufacturing-Oriented Industries

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Bangladesh Bank
(Central Bank of Bangladesh)
Head Office
Motijheel, Dhaka-1000
Bangladesh

Managing Director / Chief Executive Officer
All Scheduled Banks operating in Bangladesh

Dear Sir,

Regarding the provision of refinancing facilities from the Local Currency Green Transformation Fund for the Export and Manufacturing-Oriented Industries sector.

To establish a green economy in the country and promote sustainable growth in the export and manufacturing-oriented industries sector, Bangladesh Bank has established the Local Currency Green Transformation Fund (GTF). Refinancing facilities in local currency (Taka) will be provided to eligible customers against the bank's financing for the payment of the import value of capital machinery and parts from this fund. The policy guidelines regarding the aforementioned refinancing fund are as follows:

1. Size of the Fund: 5,000 (Five Thousand) Crore Taka (Revolving).

2. Source of the Fund: Own resources of Bangladesh Bank.

3. Tenor of Refinancing Facility: 5-10 years (depending on the type of project).

4. Purpose of Fund Formation: To facilitate the import/purchase of green/environmentally friendly capital machinery and parts in the export and manufacturing-oriented industries sector under the following initiatives:
   a. Water use efficiency (Water Use Efficiency); b. Water conservation and management (Water Conservation and Management);
   c. Waste management (Waste Management);
   d. Resource efficiency and reuse (Resource Efficiency and Reuse); e. Renewable energy (Renewable Energy); f. Energy efficiency (Energy Efficiency); g. Heat and temperature management (Heat and Temperature Management); h. Air movement and flow efficiency (Air Movement and Flow Efficiency);
   i. Workplace environment improvement initiatives (Workplace Environment Improvement Initiatives);
   j. Other sectors occasionally specified by Bangladesh Bank (Any other sector specified by Bangladesh Bank from time to time).

5. Participating Financial Institutions (Participating Financial Institution - PFI): Banks interested in receiving refinancing facilities under this fund must enter into a Participation Agreement (PA) with the Director, Sustainable Finance Department, Bangladesh Bank, Head Office, Dhaka. Banks bound by this Participation Agreement will be considered Participating Financial Institutions or PFI. The PFI must comply with the instructions issued from time to time by Bangladesh Bank through circulars/circular letters under this fund.

Date: 07 December 2022
22 Agrahayan 1429

Sustainable Finance Department
SFD Circular No.-07

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6. Interest/Murabaha Rate Structure:
   6.1) The interest/murabaha rate chargeable by Bangladesh Bank from the PFI is 1%; and 6.2) The customer-end interest/murabaha rate shall be maximum 5%.

7. Type of Refinancing Facility: Term Loan/Investment (Term Loan/Investment).

8. Grace Period: The grace period shall be maximum 01 (one) year based on the relationship between the PFI and the customer.

9. Eligibility of Customer-end Refinancing Facility:
   9.1) Refinancing facilities from this fund will be available against the payment of the import value of environmentally friendly capital machinery and parts under the initiatives mentioned in clause 4, followed by bank financing, or against the purchase of locally produced machinery and parts; 9.2) Under this fund, the loan/investment-equity ratio for a single borrower shall be maximum 70:30. However, in no case shall any single borrower be eligible for a loan facility exceeding 200 (Two Hundred) Crore Taka under this fund; 9.3) Defaulting borrowers will not be considered for refinancing facilities. Before applying for refinancing facilities, the PFI must collect the updated EOW report of the concerned customer and their concerned institutions and ensure that the customer loan is not in default; 9.4) If two consecutive Installment Repayment Dates (IRD) are not fully or partially repaid (until the specified time mentioned in the Installment Repayment Schedule - IRS), refinancing facilities under this fund will not be considered; and 9.5) The appropriate Form for Forwarding must be completed.

10. Eligibility of PFI-end Refinancing:
    10.1) All state-owned banks can provide loans under the aforementioned refinancing facility; 10.2) In the case of private and foreign banks, the rate of classified loans/investments must be less than 10%; 10.3) Regarding the maximum limit of loan/investment facilities for a single customer or group, the instructions of the Companies Act, 1991, along with the instructions mentioned in BRPD Circular No.: 1/2022 issued by Bangladesh Bank, must be followed; and 10.4) Compliance with all risk management policies issued from time to time by Bangladesh Bank must be ensured.

11. Schedule of Charges:
    In determining fees/charges against loans provided under this refinancing fund, the instructions mentioned in the circular issued by the Banking Regulation and Policy Division of Bangladesh Bank on June 10, 2021, regarding "Schedule of Charges" for scheduled banks, along with instructions from time to time issued through circulars/circular letters, will apply.

12. Documentary Checklist:
    12.1) When applying for refinancing to Bangladesh Bank, the concerned bank must submit the following documents:
    a. Letter from the customer regarding the acceptance of loan/investment under the refinancing facility; b. Updated EOW report of the customer;
    c. Copy of the Management Committee approval letter of the concerned bank in favor of the customer for availing refinancing facilities from this fund;
    d. Profile of the customer and the concerned project; e. Updated statement of the loan/investment account.

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12.2) An Energy Audit Report conducted by an Energy Auditor certified by the Bangladesh Energy Conservation Company (BECC) must be submitted; 12.3) After approval of the refinancing facility, the Managing Director/Chief Executive Officer of the institution must submit the Forwarding Letter, along with the Installment Repayment Schedule (IRS) and Installment Repayment Schedule (IRS) to the PFI.

13. Refinancing Application Process:
13.1) The application letter signed by the Managing Director/Chief Executive Officer or a designated officer one level below, along with the documents mentioned in clause 12, must be submitted to the Director, Sustainable Finance Department, Bangladesh Bank, Head Office, Dhaka; 13.2) While applying for refinancing facilities, banks must follow SFD Circular No.: 04, dated: 28 July 2020, issued by the Sustainable Finance Department regarding the Installment Repayment Schedule; 13.3) Prior to the approval of the refinancing facility, the Sustainable Finance Department will conduct a pre-inspection of the concerned project. Based on the inspection report, the submitted application, and related documents, the limit for the refinancing facility will be determined.

14. Refinancing Recovery Process:
    14.1) The refinanced amount will be recovered from the PFI on a quarterly basis according to a specified repayment schedule; 14.2) The installment interest/murabaha payable on the date fixed according to the repayment schedule will be deducted from the current account of the concerned PFI maintained with Bangladesh Bank; 14.3) In the case of syndicated financing, only the lead PFI will apply for refinancing to Bangladesh Bank, and the quarterly installments of the refinanced amount will be recovered from the lead PFI. The distribution of refinancing facilities and the recovery of installments and other liabilities of the refinanced amount will be entirely the responsibility of the lead PFI to the other participating PFIs in the syndication on a pro-rata basis. All participating PFIs in the syndication, including the lead PFI, must enter into separate Participation Agreements (PA) as per clause 5; 14.4) PFIs must maintain sufficient funds/balance in their current accounts maintained with Bangladesh Bank on the date fixed according to the repayment schedule. If recovery of refinancing facility installments is not possible due to insufficient funds/balance in the current accounts of PFIs, the recoverable amount will be recovered with additional interest/murabaha at a rate 3% higher than the interest/murabaha rate imposed at the time of refinancing, subject to sufficient funds/balance.

15. Reporting and Monitoring:
    15.1) PFIs must submit updated statements of the amount taken for refinancing quarterly (within 15 (fifteen) days after the end of each quarter) along with the attached table and a Forwarding Letter signed by the Managing Director/Chief Executive Officer, to the Director, Sustainable Finance Department, Bangladesh Bank, Head Office, Dhaka. PFIs that have entered into a Participation Agreement (PA) but have not availed refinancing facilities must submit zero statements. In the case of syndicated financing, all member PFIs, including the lead PFI, must submit separate quarterly statements for their respective refinanced shares; 15.2) If a PFI avails refinancing facilities by providing false information or if Bangladesh Bank's field inspection reveals that the loan/investment amount was not used properly, the amount provided for refinancing will be recovered in a lump sum from the current account of the concerned PFI with additional interest/murabaha at a rate of 3% over the interest/murabaha rate fixed by Bangladesh Bank.

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16. Other Conditions:
    16.1) While selecting loan/investment borrowers, granting and distributing loan/investment facilities, executing documents related to loan/investment, ensuring proper use of loan/investment funds, and monitoring loan/investment thereafter, banks must follow the instructions of the Risk Management Policy and the SFD Circular (SFD Circular No.: 03, dated: 26 June 2022) issued by the Sustainable Finance Department, as well as other relevant existing rules and regulations of Bangladesh Bank, and provide loan/investment facilities to customers in accordance with the rules. All liabilities regarding the recovery of distributed loans/investments will rest with the bank distributing the loan/investment. There will be no connection between the recovery of customer-end loans/investments and the payment of installments of the concerned refinanced amount to Bangladesh Bank; 16.2) Islamic Shariah-based banks can provide investment to customers under this fund based on their approved investment methods without violating the aforementioned conditions.

17. The Sustainable Finance Department, Bangladesh Bank reserves the right to add, subtract, and modify any conditions regarding the refinancing fund.

18. This circular is issued under the powers conferred by Section 45 of the Companies Act, 1991 (amended in 2018) and will come into force immediately.

Yours faithfully,

(Md. Rozib Ali)
Director (SFD)
Phone No.: 9530320
E-mail: rozib.ahmad@bb.org.bd

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Appendix
Quarterly Statement of Disbursement/Classification of Loans under GTF

Name of the Bank: ............................
Branch: ............................

Sl. No.	Name of the Borrower	Project Name	Type of Project	Amount of Loan/Investment (Taka)	Amount of Refinancing (Taka)	Amount of Equity (Taka)	Amount of Refinancing Received (Taka)	Amount of Refinancing Recovered (Taka)	Amount of Refinancing Outstanding (Taka)	Amount of Interest/Murabaha Charged (Taka)	Amount of Interest/Murabaha Recovered (Taka)	Amount of Interest/Murabaha Outstanding (Taka)	Remarks
1
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100

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